Euro zone inflation confirmed at 1.3% in June

Fundamental Analysis

EUR

""There is simply not enough (or any) evidence that inflation is picking up and so a change to the inflation risk assessment by the ECB cannot be justified."

— Richard McGuire, Rabobank.

Consumer inflation in the Euro zone rose in line with analysts' forecasts last month, official figures revealed on Monday. Eurostat reported that its Final Consumer Price Index came in at 1.3% in June, matching the flash estimate and falling down from 1.4% registered in preceding month. Meanwhile, the so-called core inflation rate rose 1.1% on an annual basis, following May's 0.9% increase. Moreover, the services sector inflation increased 1.6%, compared to 1.1% seen in the same month a year ago. Back in June, the ECB President Mario Draghi announced that consumer prices' growth was affected by temporary factors, such as after-effects of energy and commodity price shocks. However, after strong Euro zone's economic recovery at the beginning of the year, any further weakness in inflation is likely to diminish expectations for the ECB to remove accommodation. Despite recent figures being almost sufficient to encourage policy tightening, the European Central Bank is expected to be cautious over monetary stimulus withdrawal. Economists anticipate no changes in key interest rates until inflation reaches the 2% target.

NZD

"Household basics like rent, food, and electricity all hit consumers' pockets harder this quarter."

— Jason Attewell, Statistics NZ

Inflation in New Zealand hampered unexpectedly in the second quarter, suggesting that declining oil prices were restraining cost pressures throughout the country's economy. Statistics New Zealand reported on Monday that its Consumer Price Index was flat on a seasonally adjusted basis in the June quarter, following a 1% rise in the Q1 and falling behind expectations for a 0.2% increase. The largest upward contribution was provided by higher food prices with 0.7% jump pushed by vegetable prices. Meanwhile, the largest fall was registered in transport prices, which were down 1.3% amid lower prices of petrol and seasonally cheaper domestic airfares and car rentals. On an annual basis, the most of downward pressure came from lower telecommunication services prices and cheaper equipment. In regional terms, Auckland registered the highest increase of 3.0% in the reported quarter. The Reserve Bank of New Zealand previously signalled that it was set to keep its interest rates at a record low of 1.75% until late 2019, but recent data fuelled expectations for a rate hike by mid-2018.

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